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Air India passenger planes are seen parked at the Chhatrapati Shivaji International airport in Mumbai, India, February 7, 2017.Reuters file

In a fresh attempt to find new buyers for debt-laden Air India, the government is planning a route where the acquirer will not be obliged to take on its working capital debt that is presently around Rs 15,000 crore. The development is significant with the fact that if the proposal, which is at a very early stage is accepted, the debt burden would be halved and making it more attractive for the potential bidders. In that case, the 'Maharajah' will only be left with a debt of Rs 15,000 crore.

As per a report in the Economic Times, the proposal is expected to be discussed at the inaugural meeting of a ministerial group on Air India's divestment. The high powered ministerial group is headed by Home Minister Amit Shah with other members including Finance Minister Nirmala Sitharaman, Commerce and Railways Minister Piyush Goyal and Civil Aviation Minister Hardeep Singh Puri.

Moreover, in order to make the offer more attractive, the government has already transferred Rs 29,400 crore of debt last year to Air India Asset Holdings Ltd, a special purpose vehicle (SPV) that manages debt and assets. The SPV is in process of repaying the debt of national carrier through government-guaranteed bond issues in three batches. The step has drastically halved Air India's Rs 59,000-crore debt to around Rs 30,000 crore. Now out of total debt of Rs 30,000, around Rs 15,000 crore is working capital debt that means the burden will be further halved on acquirers.

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Reuters file

But the centre may face heat over the selling of a debt-free company. One of the senior government officials on the condition of anonymity said, "The bigger problem with this proposal is managing the optics of the government selling the company without debt." But, "reducing debt may ensure more bids for the carrier, which did not get any bids last time." With a lesser burden of debt, the step may also attract Indian bidders.

"Even with debt reduction to Rs 29,400 crore, there is a lot of debt left with the carrier. It would not make any sense unless this is reduced further," said a senior executive at a domestic airline. The airline industry showed cold shoulders to earlier government's proposal to sell 76 per cent stake in Air India as no foreign players wanted the government having owned 24 per cent after divestment.